TECHNICOLOR_REGISTRATION_DOCUMENT_2017

2 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS Liquidity and capital resources

Net cash generated from operating activities Continuing operations

Net Income from continuing operations was a loss of €219 million in 2017 compared to a loss of €106 million in 2016. Net operating cash generated from continuing operations amounted to €209 million in 2017, compared to €240 million generated in 2016. The variations between 2016 and 2017 are analyzed in the table below:

2017 (219)

2016* Variation

Comments on variations

(in million euros)

Profit (Loss) from continuing operations

(106)

(113) Mainly related to a valuation allowance for deferred tax assets in France due to the change in projections from a 14 to 5-year tax planning following the announcement of the divestiture of the Patent Licensing business.

Summary adjustments to reconcile profit from continuing operations to cash generated from continuing operations: Non-cash depreciation, amortization and impairment of assets Profit from continuing operations before depreciation, amortization and impairment of assets Cash payments of the period related to provisions Non-cash P&L impact of the provisions of the period

249

237

+12

30

131

(101)

(112)

(117)

+5

74

92

(18) Mainly related to lower restructuring provision in 2017. (41) Various non-cash adjustments, including, net interest expense, and other non-cash items, and changes in working capital

Other various adjustments

300

341

Cash generated from continuing operations

262 (44)

316 (71)

(54)

Net interest paid and received

+27 Mainly due to the refinancing in March 2017 of Old Term Loan Debt

Income tax paid

(9)

(5)

(4)

NET OPERATING CASH GENERATED FROM CONTINUING ACTIVITIES

209

240 (31)

The 2016 amounts are re-presented to reflect the impacts of Discontinued Operations (see note 12 of the Group's consolidated financial statements). *

Discontinued operations Net operating cash used in discontinued operations was €39 million in 2017 compared to €160 million generated in 2016. This decrease was mainly attributable to the payment of €77 million related to the settlements relating to the CRT litigation in the U.S. and to lower sales from our Patent Licensing business presented in discontinued operations as a result of the announcement in December 2017 of its future disposal.

Net cash used in investing activities Continuing operations Net investing cash used in continuing activities was €151 million in 2017 compared to €117 million in 2016, and included: net capital expenditures, which amounted to €146 million in 2017 ■ (compared to €152 million in 2016), due to cash expended relating to tangible and intangible capital expenditures for €147 in 2017 (compared with €153 million in 2016), net of cash received from tangible and intangible asset disposals for €1 million in 2017 (same as 2016). In 2017, net capital expenditure amounted to €69 million in the Entertainment Services segment and were mainly related to intangible asset spending and development of projects in Animation and €74 million in the Connected Home segment, mainly due to capitalized R&D projects;

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TECHNICOLOR REGISTRATION DOCUMENT 2017